Transportation gurus are fond of saying that the gas tax is a defunct, antiquated, good-for-nothing way of financing roads, bridges, and railways. They are right, of course, but sometimes I forget that despite all that, gas taxes still exist. Until governments come up with a better way to finance their infrastructure, they are probably here to stay.
There is no better example of this phenomenon than the state of Maryland. The state Legislature last week sent a bill to Democratic Gov. Martin O'Malley to increase gas taxes by 3 percent this year, and to subsequently index the tax to inflation on an annual basis. The Maryland Motor Truck Association claims the hike would make the state's fuel taxes the highest in the country, but O'Malley insists that the tax is necessary to decrease traffic congestion and build a 21st century transportation network.
Maryland isn't the only state going the way of raising taxes. The New Hampshire House recently approved a 12-cent-per-gallon gas and diesel tax increase. In tight budget environments, it's hard to come up with alternatives.
Virginia is following a more experimental course, but there is no way to get around the taxation. Republican Gov. Bob McDonnell last month inked a new law that eliminates the state gas tax and replaces it with a wholesale tax on fuel distributors and an increased sales taxes. Hybrid vehicle owners will be required to pay a separate fee, and the state's vehicle titling tax also goes up. To win the Democratic votes needed to pass the package, McDonnell withdrew his controversial request to institute tolls on Interstate 95.
The coming year will offer an opportunity for transportation wonks to observe how the various highway payment methods work, politically and fiscally. Underlying it all is a fundamental truth--that transportation networks are expensive and the public pays no matter what.
What are the pros and cons of raising the gas tax? What are the advantages of finding other taxation mechanisms for transportation, as McDonnell has done? How do governments explain a tax increase to their constituents? What are common misconceptions about taxation for infrastructure? Realistically, how much infrastructure investment can taxpayers take on? Is it enough?